Dairyland Ins. Co. v. Kluckman

• Decision Date: 05 October 1972
• Docket Number: No. 10991,10991
• Citation: 201 N.W.2d 209,86 S.D. 694
• Parties: DAIRYLAND INSURANCE COMPANY, an Insurance corporation, Plaintiff and Appellant, v. Harlan KLUCKMAN and Betty Kluckman, Defendants, third-party Plaintiffs and Respondents, Gerald G. Hilbers et al., Defendants and Respondents, v. UNIVERSAL UNDERWRITERS INSURANCE CO., an Insurance corporation, Third-Party Defendant and Respondent.
• Court: South Dakota Supreme Court

Page 209

201 N.W.2d 209

86 S.D. 694

DAIRYLAND INSURANCE COMPANY, an Insurance corporation, Plaintiff and Appellant, v. Harlan KLUCKMAN and Betty Kluckman, Defendants, third-party Plaintiffs and Respondents, Gerald G. Hilbers et al., Defendants and Respondents, v. UNIVERSAL UNDERWRITERS INSURANCE CO., an Insurance

corporation, Third-Party Defendant and

Respondent.

No. 10991.

Supreme Court of South Dakota.

Oct. 5, 1972.

Siegel, Barnett, Schutz, O'Keefe & Ogborn, Joseph H. Barnett, Aberdeen, for plaintiff and appellant.

Maloney, Kolker & Fritz, Aberdeen, for defendant and respondent Gerald G. Hilbers.

Voas, Richardson, Groseclose & Kornmann, Aberdeen, for third party defendant and respondent.

Lakeman & Krause, Mobridge, for defendants, Third Party plaintiffs and respondents.

WOLLMAN, Judge.

This is an appeal by Dairyland Insurance Company (Dairyland) from an adverse judgment in a declaratory judgment action brought by it to determine respective rights and liabilities under a liability insurance policy issued by Dairyland to Gerald G. Hilbers (Hilbers) and which was in effect on February 17, 1968, the date of a collision between an automobile driven by Hilbers and a building in Mobridge, South Dakota, which resulted in personal injuries and property damage. The action was tried on an agreed stipulation of facts.

On February 17, 1968, defendants Harlan Kluckman, Betty Kluckman and Lena Sheldon were co-partners doing business as Hepper-Kluckman Motors of Mobridge South Dakota, an automobile sales agency and repair shop service business. On that date, Hilbers made inquiry of Harlan Kluckman concerning a used 1964 Oldsmobile 88 automobile which was being offered for sale to the public on the lot of Hepper-Kluckman Motors. As a result of this conversation, Harlan Kluckman agreed to demonstrate the Oldsmobile to Hilbers. Harlan Kluckman then drove the Oldsmobile from the car lot to a point several miles out of Mobridge on Highway 12, accompanied by Hilbers and a companion. At that point, Harlan Kluckman turned the driving over to Hilbers. As Hilbers was driving the car on the return trip to the Hepper-Kluckman Motors lot he collided with a building in Mobridge, the collision resulting in injuries to Harlan Kluckman and Hilbers and property damage to the Oldsmobile and the building.

At the time of the accident Hilbers was not employed by Hepper-Kluckman Motors, nor was he an owner of, or in the course of any employment for, an automobile sales agency, repair shop, public service station, storage garage, or public parking place. The parties agree that he was driving the Oldsmobile for the purpose of determining for himself whether he desired to purchase the automobile from Hepper-Kluckman Motors.

As a result of the accident, Harlan Kluckman and Betty Kluckman, his wife, made separate claims against Hilbers and commenced suits against him in circuit court in Walworth County, South Dakota, asking for substantial damages. There is also outstanding a contingent claim against Hilbers for the property damage to the Oldsmobile automobile.*

On the date of the accident there was in effect between Dairyland and Hilbers an automobile liability insurance policy which is the subject of the declaratory judgment action. The pertinent part of the policy reads as follows:

'V Use of Other Automobiles

If the named Insured is an individual or husband and wife and if during the policy period such named insured, or the spouse of such individual if a resident of the same household, owns a private passenger automobile covered by this policy, such insurance as is afforded by this policy under coverages A, B and C--1, with respect to said automobile applies with respect to any private passenger automobile subject to the following provisions:

(a) Under coverages A and B the word 'insured' includes (1) the named Insured and spouse provided his actual operation is with the permission of the owner and is within the scope of such permission, and (2) any other person or organization not owning or hiring the automobile, provided the actual operation is by a person who is an insured under (1) above. Insuring agreement III does not apply to this insurance.

(b) * * *

(c) This insuring agreement does not apply:

(1) * * *

(2) to any accident arising out of the operation of an automobile sales agency, repair shop, service station, storage garage or public parking place;

(3) * * *.'

Dairyland contends that because at the time the accident occurred Hilbers was driving the Oldsmobile for the purpose of determining whether or not he wished to buy it, the accident necessarily arose out of the operation of an automobile sales agency; therefore, Dairyland is not required to provide liability coverage to Hilbers for any claims resulting from the accident.

The trial court did not state in its memorandum opinion, findings of fact or conclusions of law that the accident did not arise out of the operation of an automobile sales agency. Paragraph II of the conclusions of law states in part that:

'The Court concludes as a matter of law that provision V(c)(2) is not applicable to the facts in this case and accordingly concludes there is insurance coverage, obligation of indemnity and defense owing by Dairyland Insurance Company, an insurance corporation, to the defendant Gerald G. Hilbers.'

Dairyland argues that in order to reach this conclusion the court of necessity had to read exclusionary clause V(c)(2) as applying only to accidents arising out of the operation by the named insured of an automobile sales agency, repair shop, service station, storage garage or public parking place. Dairyland contends that such a reading of the exclusionary clause is a classic example of a forced or strained construction of policy language for the purpose of creating an ambiguity that can be construed against an insurer. Strong v. State Farm Mutual, 76 S.D. 367, 78 N.W.2d 828. Dairyland argues that because throughout the various clauses of the insurance policy references are made to 'the named insured', the absence of such words, or their equivalent, in exclusionary clause V(c)(2) emphasizes that the clause means just what it says, i.e., that no insurance is provided to the named insured under insuring agreement V in connection with any accident arising out of the operation of an automobile sales agency and the other enumerated businesses by the named insured or by anyone else.

Most of the reported decisions involving exclusions of coverage with respect to the operation of automobile sales agencies, repair shops and the like concern the interpretation of clause excluding coverage for automobiles which are used in the automobile business and excluding coverage to persons or organizations operating an automobile sales agency or related businesses. See, e.g., Hammer v. Malkerson Motors, Inc., 269 Minn. 563, 132 N.W.2d 174; Pollard v. Safeco Ins. Co., 52 Tenn.App. 583, 376 S.W.2d 730; Annot., 47 A.L.R.2d 556; Annot., 71 A.L.R.2d 964; 7 Am.Jur.2d, Automobile Insurance, § 125, p. 444.

In Dairyland's favor is the case of Bendykowski v. Hall Chevrolet Co., 10 Wis.2d 579, 103 N.W.2d 516, which involved a policy exclusion clause identical to the one found at V(c)(2) of the policy in the instant case. In that case the named insured became interested in buying a car with an automatic shift to replace his car which had a standard gear shift. He and his wife went to an auto agency showroom where he made his wishes known to one of the salesmen. The salesman took the named insured and his wife for a ride in a demonstrator automobile equipped with an automatic shift. While the named insured's wife was driving the demonstrator car at the salesman's suggestion, she struck and injured a pedestrian. The Wisconsin court distinguished its earlier decision in Tolsma v. Miller, 243 Wis. 19, 9 N.W.2d 111, which involved the interpretation of a clause which excluded coverage from any person or organization operating an automobile sales agency and related businesses with respect to any accident arising out of the operation thereof. In considering the exclusionary clause in the Bendykowski case, the court stated that:

'The policy we must examine now has quite a different exclusion clause. This one is concerned with the circumstances of the accident and how it arose. If the accident arises out of the operation of an automobile sales agency this is a risk not insured against, and the policy does not protect either the purchaser of the policy or an additional assured against that hazard. The language of the exclusion clause is clear and unambiguous and not subject to judicial construction.

'The court is faced solely with a question of fact: Did the accident arise out of the operation of an automobile sales agency? We think that there is no question but that it did. * * * It clearly arose out of an operation of the automobile sales agency. It comes plainly within the exclusion clause of appellant's policy. The Tolsma case, supra, is inapplicable...